The end of QE remains unplanned - why?

There is an interesting article by Douglas Carswell on Unherd today.


In it he shows both his grasp of the situation and also the lack of any nous to deal with it.


Correctly, he identifies QE as being one of the main drivers of social ill over the past decade. The rich indeed have got richer through no effort other than pure financial alchemy - assets have gone up in price, if you owned assets, then yippee!


Meanwhile debt has been too cheap, now everyone has debt and even the Government is overly keen on saddling people such as students with debt. The Government has both too much deficit and debt - as do most around Europe.


That this is the fault of the Central Bankers is undeniable - conservative types, as you would want, they have done very little for the past 5 years. Last year in the UK they even decreased rates further.


Worse, there is still no plan for unwinding QE, in an off-guard moment last year one leave to the Bank was busily promoting the opposite - suggesting QE was here forever and interest rates could never be raised back to what were considered normal levels.


I find this very hard to buy, it is the classic "this time, its different" mantra that never works out as its proponents say. What happened was that the economies of the West, loaded by too much private sector debt due to the banking bubble, collapsed and to avoid destruction, the Government took on the debt.


Thanks to that, the Government's are prepared to wait a generation or two for the debt to inflate away (this time via currency depreciation, hence the currency depreciation war of the past 7 years). So there is limited immediate pain. I can see why civil service mandarins and central bankers think this is the best way forward, which for them it is. It sees continuity of service for themselves and their class.


Where Carswell goes well off target is endorsing the mad Labour plans for more debt and financial alchemy to double-down on the mistakes of the past! How even more QE is supposed to fix the current problems is beyond me - asset prices (this time of chosen assets, remember Gordon Brown and the Gold sale!) would still rise and the side effect maybe some more infrastructure - but the main event would be crippling Japan style debt.


The only sensible course is to wean us off QE. This will be painful, reversing QE will reduce Government revenue, which means less spending, because today it is getting on for £10 billion in Government income - all from money printed by its own bank and lent to itself.


We can't raise rates too high, as that affects those most hurt by the debt bubble, those without assets. We will likely need higher taxes on capital gains, including houses, to make up the hole in Government finances.


I don't like ever advocating tax rises, so I won't - the balance to increasing capital gains taxes must be reducing income taxes further - perhaps not quite in balance as their is QE to be unwound and a deficit to clear. But a re-basing of the tax system based on the current economic environment is long-overdue. Really, the most surprising thing is that is a necessity of the change in Central Bank monetary policy and you would think they might raise is sometime, that they don't is a bug of the system where monetary and fiscal oversight are separated.

Uherd - will this work?

Enough of meaty topics this week!


Since I started blogging, I have always had time for Tim Montgomerie - perhaps this is related to him making time for me!


His new news venture is an interesting one, having left The Times. He intends to have a long-piece magazine-style website, not focusing on short-term themes. He certainly has lined up an, err, interesting mix of writers contributing.


The first topic, of the influence of rolling news and social media is an interesting one - if a little rhetorical - of course rolling news and social media are affecting the government - we can all see Jeremy Corbyn FFS!.


Perhaps some light will be drawn as to what exactly we are supposed to do about this, but I am less convinced when you get Alistair Campbell, the arch-creator of this mess, to opine from afar.


However, does the world need another alternative to the Spectator - indeed, can something like this work? I kind of hope so, because with news commentary declining in relevance and readership I do see around me that people are becoming less informed about the facts of the world than we previously the case.


Am I right to think that or just getting old?